Zero ratghanistan is being sold in the
local market which is depriving the exchequer of millions of rupees.

In last three or four years the
previous month of March 2011 has been the best month for domestic sales on
account of end of winter season in the Northern area, which drives bulk of
domestic demand as well as completion of farmers' cash receipt from cotton crop.

As far as export of cement to the
Middle East was concerned, it looks on a slower side primarily due to lower
prices in the Middle East region and absence of inland freight subsidy, which is
expected to hamper seaborne exports of cement producers especially in the
Northern part of the country.

Hence, the marked recovery in domestic
cement consumption is a triggering factor for domestic sales that is apparently
higher than that on exports in the current situation.

According to the informed sources, the
price of cement marked for export to Afghanistan does not contain duties and
taxes amounting to around Rs90 per bag. These levies are included in the price
of cement bags sold locally and the cement manufacturers could be exploiting
loopholes in the system to sell those bags locally minting more profit.

The experts said that there is a strong
need to monitor the exports to Afghanistan and Federal Board of Revenue (FBR)
should take concrete measures to curb this malpractice, which is depriving the
national exchequer of millions of rupees.

"This practice is also injurious for
the cement mills that market their product in local market after paying all
government levies," said an analyst on condition of anonymity. He said that
mills selling cement in local market after availing Rs90 duty concession on
export marginalize the other producers who are already posting huge losses due
to low sales and high cost of production.

"This unethical practice has surfaced
in recent years," said another expert. He said that there should be a credible
system that should monitor the physical delivery of cement to Afghanistan. He
said that the FBR is the competent authority to devise a transparent system in
this regard.

The solution to eliminate evasion of
duties lies in proper monitoring of production and dispatches by the federal
board of revenue which will also ensure fair play for all cement units and check
tax evasion.

He said that in the past this
monitoring was done by the All Pakistan Cement Manufacturers Association, which
for some reason was stopped by Competition Commission of Pakistan.

He said that the FBR could replicate
the monitoring system adopted by APCMA in the past, and that was designed by
credible chartered accountant firms. The technology, he added, is available and
its transparent use could boost FBR revenues.

Experts said that this leakage of taxes
should not be taken lightly as it does not only hurt tax collection but also has
grave repercussions for the cement industry. They said that the industry is
passing through testing times and tax evasion by few mills is further affecting
the viability of tax paying mills.

They pointed out that monitoring of
production would also address the issue of under reporting as under reporting of
production by some units goes to the disadvantage of the majority of the
compliant units. Moreover, they added if the practice disposing of cement meant
for export in domestic market is not dealt with sternly, it would be spread to
other products being exported to Afghanistan.

"The dilemma is that most mills are
disposing cement at loss in the domestic as well as foreign markets to utilize
some capacities," said one expert adding that still the industry is unable to
utilize over 60 per cent of its installed capacity.

The industry historically posted growth
during the years when the production was fairly and transparently monitored, but
after the practice stopped, the industry is continuously posting negative
growth.

The total operational cement production
capacity was 44.682 million tons in 2009-10 that declined to 41.235 million tons
due to closure of some cement plants.

Exports that increased by 140 percent
in 2007-08 to 7.716 million tons and then by over 39 per cent next year to
10.752 tons registered nominal decline of 0.86 per cent in 2009-10 to 10.657
million tons.

However, the industry's hope of
increasing production through accelerated exports suffered a setback due to
exceptionally high increase in transportation cost and government's failure to
provide its promised transport subsidy and the exports have declined by 17.03
percent in the first seven months of this fiscal to 5.194 million tons.

Actually, loss of revenues on one
account or the other contributes to the fiscal deficit for the government, which
having found no option introduces new levies or enhances the rate of existing
taxes to reduce budget deficit. The best example in this respect is the increase
in power tariffs and petroleum prices recently. Though such taxation measures
help bridging the financial gap, yet they add to the hardships of the common
person in the form of price inflation.

In fact, the inflated prices should be
the major concern of the government as the uncontrolled prices can be a major
cause to bring down the graph of popularity for an elected government.

The prevailing situation calls cautions
about implications of the economic decisions.

It may be noted that the provincial
government put a ban on inter-district movement of the wheat, which annoyed the
flour millers and they decided to shutdown their mills for three days to lodge
protest over what they called the unnecessary ban on wheat movement imposed by
the Sindh government last week.

Representatives of flourmills
association said that the supply of wheat to the Karachi flourmills has stopped,
following the enforcement of section 144, resulted in depletion of stock of the
mills even to meet one-day requirements.

The suspension of work by the
flourmills naturally creates a shortage of flour in the market, which ultimately
results in price hike of the basic food items. The flourmills are rightly
pleading that sufficient stock of wheat is available in the country and the ban
on its movement is paving way for a price hike due to short supply of wheat and
subsequently of flour in the market.